Russia’s Rush To Swiss Franc

It’s hard to see how any currency is doing badly against the euro lately but the Russian ruble is certainly one. There are a few signs of problems in Russia to come but most notably has been the recent rush to convert the ruble to swiss francs.

during April the Russian currency lost out substantially to a euro in crisis. (The following month, it lost 14% against the Dollar.) Bruce also spoke with a Swiss banker who told him that, despite the massive flight to Switzerland for money saftey in recent weeks, the biggest inflow came from Russia. The Gnome told him the reason: “It’s politics and economics together. People are afraid” he said – and that’s my view too: Putin’s power base is nowhere near as stable as many in the West think, and in a depression – when people don’t want to buy much energy – Russia has to be one place that will catch a serious case of pneumonia.

The Slog’s view of Russia’s economic future is not good and it looks as if the smart money is to convert your rubles now.

Russia is in a similar position to Australia: it exports very little in the way of added-value manufacture, and is hugely overdependent on global economic growth needing raw materials and energy. My information is that foreign investors, senior businessmen and well-placed people in the regime are gloomy. I think the oil price decline will continue, and so Moscow will be forced into a huge budget deficit: caused by lower tax intake from slowed economic growth…plus a whole shedload of money required to defend the Ruble’s credibility.

The big question in all of this, is what is Europe’s exposure to Russia?

Not many ‘experts’ talk about the EU’s banking exposure to Russian debt, probably because they don’t grasp just how corrupt and unreliable most of the borrowers are. My hunch is that they’re about to find out.